Revised in Foreign Exchange Regulations
Foreign Exchange Management
The government has recently modified the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and the Liberalized Remittance Scheme (LRS) for resident individuals for further liberalizing the existing guidelines.
Accordingly, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 (USD 1,25,000 earlier) per financial year for any permissible current or capital account transaction or a combination of both.
These include the purposes of education or for the maintenance of close relatives. Further, authorized dealers may allow remittances exceeding USD 250,000 based on the estimate received from the educational institution abroad or a hospital abroad.
For small value remittances (up to USD 25,000), the documentation requirement is simpler and even PAN card is not insisted upon.
Currently, as per the provisions of the Income-tax Act, 1961 read with Income-tax Rules, 1962, no certificate from a Chartered Accountant is required to be obtained for certain remittances including sending money to students i.e.,
For remittances made under RBI’s purpose Code “S0305-Travel for education (including fees, hostel expenses etc.)” and remittance towards personal gifts and donations i.e., for RBI’s Purpose Code “S1302”.
The complete list of payments in which no certificate from a Chartered Accountant is required to be obtained is given in explanation (2) to Rule 37BB of the Income-tax Rules, 1962.
CBDT Signs Advance Pricing Agreements (APAs) to Usher in Certainty in Taxation
As a part of a major initiative to usher in certainty in taxation, the Central Board of Direct Taxes (CBDT) entered into two unilateral Advance Pricing Agreements (APAs) on 3 August, 2015 with two Multi-National Companies (MNCs) which includes the first APA with a “Rollback” provision.
With this, the CBDT has so far signed 14 APAs of which 13 are unilateral APAs and one is a bilateral APA. The 14 APAs signed relate to various sectors like telecommunication, oil exploration, pharmaceuticals, finance/banking, software development services and ITeS (BPOs).
These Unilateral APAs are agreed between Indian taxpayers and the CBDT, without involvement of the tax authorities of the country where the associated enterprise is based.
Bilateral APAs include agreements between the tax authorities of the two countries. An APA with the “Rollback” provision extends tax certainty for nine financial years as against five years in APAs without “Rollback”.
APAs settle transfer prices and the methods of setting prices of international transactions in advance.
The Government is committed to conclude a large number of APAs to foster an environment of tax cooperation and certainty.
Currently, a number of unilateral as well as bilateral APAs with Competent Authorities of UK and Japan etc are at advanced stage of negotiations.
A Framework Agreement was recently signed with United States under the Mutual Agreement Procedure (MAP) provision of the India-US Double Taxation Avoidance Convention (DTAC).
This is a major positive development. About 200 past transfer pricing disputes between the two countries in Information Technology (Software Development) Services [ITS] and Information Technology enabled Services [ITeS] segments are expected to be resolved under this Agreement during the current year.
So far, 35 disputes have been resolved and another 100 are likely to be resolved in the next three months.
The Framework Agreement with the US opens the door for signing of bilateral APA with the US. The MAP programs with other countries like Japan and UK are also progressing very well with regular meetings and resolution of past disputes.
These initiatives will go a long way in providing stable tax environment to foreign investors doing business in India.
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